NY Shop Slated For Solid Return On Trade School

Target: Vatterott Educational Centers Inc.

Price: Undisclosed

Sponsor: TA Associates

Seller: Wellspring Capital Management

Financial Adviser: Seller: BMO Capital Markets

Legal Adviser: Sponsor: Goodwin Procter LLP; Seller: Paul, Weiss, Rifkind, Wharton & Garrison LLP

Wellspring Capital Management appears poised to generate a significant profit on its investment in Vatterott Educational Centers Inc., a St. Louis, Mo.-based post-secondary trade school that the firm agreed to sell to TA Associates.

Wellspring Capital executives declined to discuss the exact return multiple, but the firm in a May refinancing recouped all of the $40 million equity investment it made in 2003 in a $105 million deal to buy the company, according to CapitalIQ. “This has been a very successful exit for Wellspring,” Josh Cascade, a partner at the New York-based buyout shop, told Buyouts. Terms of the sale to TA Associates, which is expected to close in the fourth quarter, were not released.

Asked why Wellspring Capital would sell the company in such a poor M&A market, Cascade cited the length of the firm’s ownership, the company’s expansion from a small family-owned enterprise to a leading platform in the education industry, and growth prospects. “We enjoyed significant growth, but there were still good prospects for the buyer as well,” Cascade said. Wellspring Capital’s previous exit came in 2007 when it sold 67 percent stake in VISTAR Corp., a Centennial, Colo.-based foodservice distributor, to Blackstone Group, while maintaining a 22 percent stake, in a deal valued at $420 million.

Cascade said the firm improved the company during its ownership by renovating and expanding its campuses and by expanding the number of programs it offers. When Wellspring Capital bought the business most of its courses were geared toward information technology, HVAC repair, and plumbing; 80 percent of the students were male. Today Vatterott Educational Centers also trains people for jobs in health care, culinary arts, and court reporting, and its student body is split evenly between males and females, Cascade said. The company serves more than 7,500 students on 22 campuses across nine Midwestern states.

Cascade, William Dawson, managing partner, and Millet Bartoul, associate, oversaw the deal for Wellspring Capital.

For TA Associates, the investment marks a return to a sector where it has already seen success. The Boston-based firm earned a strong multiple on its investment in Florida Career College, which it sold to Abrams Capital LLC and Greenhill Capital Partners LLC in 2007, according to Jeff Barber, managing director. Barber said the firm had been looking for another education-related deal for a while, meeting with management at about 100 education companies over the last 12 to 18 months before meeting Vatterott CEO Pam Bell. The firm, which manages $16 billion, plans to support Bell’s plan to continue to diversify the company’s curriculum, Barber said.